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Share-based Payments
 3 Months Ended
Dec. 31, 2012
Share-based Payments  
Share-based Payments

11.       Share-based Payments

 

The fair value of the Company’s employee stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. The expected term of awards granted represents the period of time the awards are expected to be outstanding. The risk-free interest rate is based on U.S. Treasury bond rates with maturities equal to the expected term of the option on the grant date. The Company uses historical data as a basis to estimate the probability of forfeitures. The Company did not grant any employee stock options during the three months ended December 31, 2012 and 2011.

 

Stock option activity for the three months ended December 31 was as follows:

 

 

 

2012

 

2011

 

 

 

Shares of stock
under options

 

Weighted average
exercise price

 

Shares of stock
under options

 

Weighted average
exercise price

 

 

 

(in millions)

 

 

 

 

(in millions)

 

 

 

 

Outstanding at September 30

 

2.5

 

$

22.81

 

2.9

 

$

21.38

 

Options granted

 

—

 

—

 

—

 

—

 

Options exercised

 

(0.3

)

12.71

 

(0.2

)

10.61

 

Options forfeited or expired

 

(0.1

)

27.18

 

—

 

25.22

 

Outstanding at December 31

 

2.1

 

23.67

 

2.7

 

22.22

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest in the future as of December 31

 

2.1

 

$

23.65

 

2.7

 

$

22.16

 

 

The Company grants stock units to employees under its Performance Earnings Program (PEP), whereby units are earned and issued dependent upon meeting established cumulative performance objectives over a two or three year period. Additionally, the Company issues restricted stock units to employees which are earned based on service conditions. Total compensation expense related to share-based payments was $6.8 million and $8.6 million during the three months ended December 31, 2012 and 2011, respectively. Unrecognized compensation expense related to total share-based payments outstanding was $87.3 million and $39.0 million as of December 31, 2012 and September 30, 2012, respectively, to be recognized on a straight-line basis over the awards’ respective vesting periods which are generally three years.

 

Cash flows attributable to tax benefits resulting from tax deductions in excess of compensation cost recognized for those stock options (excess tax benefits) is classified as financing cash flows. Excess tax benefits of $0.7 million for the three months ended December 31, 2012 and 2011 have been classified as financing cash inflows in the consolidated statements of cash flows.